Diesel prices on slow climb through 2011

June 30, 2010
After approaching nearly $5/gal. during a meteoric rise in 2008, diesel fuel prices dropped along with the economy in 2009. But since falling to nearly $2/gal. in early 2009, prices have steadily climbed, a trend that should continue through 2011, according to Neil Gamson of the U.S. Energy Information Administration

After approaching nearly $5/gal. during a meteoric rise in 2008, diesel fuel prices dropped along with the economy in 2009. But since falling to nearly $2/gal. in early 2009, prices have steadily climbed, a trend that should continue through 2011, according to Neil Gamson of the U.S. Energy Information Administration (EIA).

Gamson told Fleet Owner that EIA is predicting diesel prices will average $2.96/gal. this year and climb to $3.11/gal. in 2011. In 2009, on-highway diesel fuel retail prices averaged $2.46/gal.

Prices, which averaged $2.92/gal. in the most recent report this week, are influenced by a number of factors, but the two issues many in this country are focused on – the BP (NYSE: BP) oil spill in the Gulf of Mexico and the proposed moratorium by President Barack Obama on deep-water drilling– will have little to no impact on prices, Gamson said.

“It’s not going to have a price impact in the short-term,” he says. “There’s talk that if things get extended longer, it could be cumulative and have an impact in 2012.”

Gamson says the moratorium, if it is enacted, would eliminate about 26,000 barrels a day from the U.S. crude oil supply in 2010 and 27,000 barrels a day in 2011. Neither estimate would put much of a dent in the U.S. supply, which requires about 5 million barrels a day.

The price estimates, Gamson said, can be off due to fluctuations, some short-term disruptions such as hurricanes, and other long-term variables such as political uncertainty in the Mideast.

“The hardest part is getting the crude oil price,” he said. “You might have some fluctuations in margins, but that is short-term. It’s a global commodity, but it’s ultimately a supply-and-demand issue.”

The U.S. and world economies have a greater impact on prices, according to Gamson. “If the economy gets worse than expected, then crude oil prices would go down more than expected.”

While there is plenty of economic unrest in Europe these days, Gamson said to keep a closer eye on fuel consumption in Asia, particularly China. EIA forecasts world oil consumption growth of about 1.5 million barrels a day in 2010 and 1.6 million in 2011, with much of that consumption coming in the Asia-Pacific and Middle East regions. However, that growth can change based on the political winds and the opinion of OPEC.

“OPEC has been fairly disciplined,” Gamson says. “They seem comfortable in the $70-80 range (for crude oil). The major player in the field is Saudi Arabia; if they see prices dropping, they could cut output” and that could drive up prices.

A barrel of crude oil was trading at $76.83 this morning ahead of an Energy Dept. report that was expected to indicate U.S. oil supplies declined for the quarter.

For the U.S. trucking industry, though, if the predictions play out as expected, the sudden pain of rising diesel prices that hampered much of the industry in 2008 won’t be returning anytime soon.

About the Author

Brian Straight | Managing Editor

Brian joined Fleet Owner in May 2008 after spending nearly 14 years as sports editor and then managing editor of several daily newspapers.  He and his staff  won more than two dozen major writing and editing awards. Responsible for editing, editorial production functions and deadlines.

Sponsored Recommendations

Tackling the Tech Shortage: Lessons in Recruiting Talent and Reducing Turnover

Discover innovative strategies for recruiting and retaining tech talent in the trucking industry at our April 16th webinar, where experts will share insights on competitive pay...

Stop Sweating Temperature Excursions

Advanced chemical indicators give you the peace of mind that comes from reliable insights into your supply chains. Compromised shipments can be identified the moment they arrive...

Stop Sweating Temperature Excursions

Advanced chemical indicators give you the peace of mind that comes from reliable insights into your supply chains. Compromised shipments can be identified the moment they arrive...

How Electric Vehicles Help You Prolong the Life of Your Fleet

Before adopting electric vehicles for commercial/government fleets, prioritize cost inquiries. Maintenance is essential; understand the upkeep of EV fleets. Here’s what you need...

Voice your opinion!

To join the conversation, and become an exclusive member of FleetOwner, create an account today!